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In Search of Civil SocietyMarket Reform and Social Change in Contemporary China$

Gordon White, Jude A. Howell, and Shang Xiaoyuan

Print publication date: 1996

Print ISBN-13: 9780198289562

Published to Oxford Scholarship Online: October 2011

DOI: 10.1093/acprof:oso/9780198289562.001.0001

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The Rise of the Entrepreneurs and Business Associations

The Rise of the Entrepreneurs and Business Associations

(p.184) 8 The Rise of the Entrepreneurs and Business Associations
In Search of Civil Society

Gordon White

Jude Howell

Shang Xiaoyuan

Oxford University Press

Abstract and Keywords

This chapter focuses on a key social group, ‘entrepreneurs’, which, in organizational terms, straddles the ‘caged’ and the ‘incorporated’ sectors in the sense that it has been ‘represented’ by both pre-existing and new-style organizations. It discusses that the category of ‘entrepreneurs’ contains two main segments: enterprise managers in the state sector of the economy, and a newer strata of managers and owners in the non-state sectors.

Keywords:   entrepreneurs, enterprise managers, state sector, economy, non-state sectors, organizations

Historical thinking about the emergence of civil society and its impact on the nature of state-society relations, whether in the Marxist or non-Marxist traditions, has attributed a crucial role to the emergence of a private bourgeoisie along with the development of a market society. The ability of members of this class to amass social power through their control over economic resources and transactions provided a basis for the rise of an independent and influential social sphere, the denizens of which could act as agents of political transformation by staking out an area of rights and freedoms and constraining the state to guarantee their exercise. Something of the same case has been made in relation to the social impact of China's economic reforms: that the spread of markets would lead, in the words of a prominent critical intellectual, Liu Binyan (1989: 35), to the rise of ‘a relatively independent middle class…in the countryside and cities’ which could provide the social basis for political change along liberal lines.

The spectre of such a scenario of bourgeois liberalization was of obvious concern to the conservative Party leaders who took over after the Beijing Massacre in June 1989. For example, the director of the CCP Propaganda Department, Wang Renzhi (1989), in an attack on the ideology of bourgeois liberalisation, criticized Liu Binyan and others who ‘place their hopes on the middle class’, notably private entrepreneurs, and proclaimed that this could not be permitted to happen because the public sector would remain predominant in a reformed socialist economy and the option of privatization would be rejected. In emphasizing the political measures needed to prevent such a scenario, Wang was acknowledging it as a real possibility if the economic reforms were allowed to go ‘too far’. To the extent that the reforms were in fact deepening in the mid-1990s, when the principle of the predominance of the public sector was under attack, proposed changes in property relations were promoting a quasi-privatization of the public sector and the non-public sectors of the economy were expanding at breakneck speed, we would expect to see an accelerating emergence of a new stratum of economic influentials across the economy.

In this chapter we aim first to trace the extent to which a potentially powerful stratum of entrepreneurs are in fact emerging in Chinese society under the impact of economic reform and to identify the precise social character of this group. We shall then explore the institutional implications (p.185) of this process by looking at the various kinds of associations which have emerged to serve as organizational links between new business groups and state agencies. As in our earlier chapters, we are concerned to discover whether these associations reflect the power and aspirations of emergent business interests and to that extent are elements of an emergent civil society, or whether they embody rather the efforts of the Chinese Party/state to control and incorporate new social forces.

The Policy Context

Central elements in the economic reforms have contributed to the reshaping of existing business and managerial strata and the creation of new ones. Institutional reforms in the state sector have sought to grant more operational autonomy to managers in state enterprises, both in relation to state officials in their superior administrative departments and Party officials within the enterprise. Concomitant managerial reforms have sought to strengthen their professional identity and raise their competence through higher educational requirements and specialized management training (Shenkar 1991 and Warner 1992). Efforts to increase managerial autonomy in state enterprises have passed through successive stages, from early experiments in enterprise profit retention in the early 1980s, to the factory director responsibility system launched in 1984, to various forms of contract responsibility system and leasing beginning in 1987, and moves towards establishing a ‘modern enterprise system’ based on share-ownership in the early-mid-1990s.1 As of 1995, however, the public sector was still proving highly resistant to change and the issue of further reforms was a matter of bitter dispute within the Party leadership. In consequence, the effort to create a new breed of professional, market-oriented managers in public enterprises was still far from realization.

Another pillar of the economic reforms was to encourage diversification of ownership forms and economic institutions throughout the non-agricultural economy. Though the private sector was initially expected to act as a relatively small complement to the public (state and collective) sector, policy and ideology gradually changed to allow it greater scope. Statistics for early 1994 suggested that private firms accounted for over 80 per cent of all commercial retail, catering and service establishments and, if one adds joint ventures, of nearly 14 per cent of the gross value of industrial production as of the beginning of 1993. The scale of private enterprises was also increasing, measured in terms of registered capital which rose from an average of 250 to 4,837 yuan for individual/ household businesses between 1981 and 1994 and from 93,000 to 286,000 yuan in larger-scale private enterprises between 1989 (p.186) and 1994. An amorphous new-collective sector also blossomed in the late 1980s and early 1990s, particularly in the form of rural township and village enterprises (TVEs). Much of this sector consisted in fact of disguised private enterprises which had donned the ‘red hat’ of a collective to avoid discrimination against the private sector and gain the benefits granted preferentially to collective enterprises.2

By the beginning of 1993, non-state sectors were producing 52 per cent of gross output in industry, a sector previously dominated by state enterprises.3 Moreover, a projection in mid-1992 predicted that the combined private/ collective sectors would be producing 61 per cent of total industrial output by the year 2000, the state sector being reduced to 27.2 per cent.4 In the more dynamic coastal regions, these structural changes were already well advanced. In Guangdong province, for example, the proportion of registered capital between the state, collective and non-publicly-owned sectors in late 1993 was 30.2, 16.4, and 53.5 per cent respectively, while the employment proportions were 30, 38.3, and 31.7 per cent respectively. The non-public sector was mainly concentrated in small-scale industries, reflected in the fact that the numerical proportions of enterprises in each sector were 7.6, 18.2, and 74.2 per cent respectively.5 By the early 1990s, even the previously sacrosanct principle of the necessary dominance of the public sector in a socialist economy was being questioned as the traditional public sector, composed of state and quasi-state, old-style, large-collective enterprises, was being shaded out by the new sectors.

If we take into account the fake collectives, the fact that other private firms tried to cloak themselves as joint ventures through deals with overseas Chinese connections and the growing impetus towards converting state enterprises into share-based companies, one can argue that the ownership structure of the Chinese economy was undergoing fundamental change in the mid-1990s. Ideologically and politically, moreover, the atmosphere was much more friendly to the private sector and some of the private enterprises cloaked as collectives were ‘coming out’, and doffing their red caps.6 The balance of economic power was shifting rapidly from state officials to more or less independent economic actors of various kinds. The emergence of the new business groups was becoming a palpable aspect of the Chinese social scene, visible in in luxurious lifestyles and conspicuous consumption.7 But these groups came from a variety of sources and, to the extent that one can refer to them as a new entrepreneurial stratum, this was a very diverse social entity, as one would expect in an era of rapid and profound transition.

(p.187) The Nature of the New Entrepreneurs

The word ‘entrepreneur’ (occasionally translated as ‘enterpriser’) is the usual English translation of the Chinese term qiyejia. However, this word—which literally means ‘enterprise expert’ just as kexuejia means ‘science expert’ or scientist—is not equivalent to the English idea of ‘entrepreneur’. The latter tends to refer to a certain type of innovative and risk-taking person who combines factors of production in ‘creative’ ways and ‘entrepreneurship’ to the corresponding psychological quality that can contribute to economic development along with other factors of accumulation.8 The Chinese term ‘entrepreneur’ is a diffuse and ambiguous category. For example, officials of the Shenyang Entrepreneurs’ Association admitted that they could not yet come to a clear definition, although they had thought about it for a long time.9 The actual members of this association in late 1992 were overwhelmingly top managers from large and medium state enterprises in the city (out of 400 enterprises represented, only one was private). One can detect similar ambiguity in a speech made by Vice-Premier Zhu Rongji at a meeting of the Shanghai Entrepreneurs’ Association in 1992. Zhu admitted that an entrepreneur ‘could be defined in various ways’ and proceeded to give his own definition, which envisaged a virtually heroic individual who could work hard, share the vicissitudes of his/her workforce, be technologically savvy, cosmopolitan, and capable of motivating his/her workforce to greater effort and productivity.

As such, the entrepreneur is a model character, redolent of the ‘red’ models so characteristic of the Maoist era.10 But the defining characteristics of the model have become a subject of controversy within the CCP leadership, revealing ideological differences over the wider meaning of economic reform. While Zhu's model entrepreneur is scientific and sophisticated, Premier Li Peng's definition of a socialist entrepreneur in the aftermath of the 4 June Incident stressed selfless dedication to socialism, awareness of the importance of ideological and political work within the enterprise, and a commitment to the welfare of the workforce.11 Well into the 1990s, official ideology continued to define entrepreneurs as ‘members of the working class’, partly as an attempt to forestall any criticism from leftist cadres and workers that Party efforts to exalt entrepreneurs as a stratum was ‘belittling the working (p.188) class’.12 By late 1994, the idea was being defined in increasingly bourgeois albeit equally heroic terms. Listen to the words of Hu Ping, a senior Party official and director of the State Council's Special Economic Zones Office, speaking in Shanghai in November that year:13

Perhaps we can list the following as their rational objectives: (to be) extremely rich, very famous and highly ethical…These rich entrepreneurs, who will be as good as and can compete with international business giants, will be admitted by foreign government figures. These entrepreneurs will be very famous across China for centuries. They will be highly ethical, giving top priority to social benefits and regarding private gains as secondary.

Since different sections of public opinion see many business people— particularly but not exclusively in the private sector—as either exploitative or corrupt, the attempt to establish the term as an estimable social category is difficult, whether in socialist or bourgeois terms. Given the fact, moreover, that the issue of defining an entrepreneur is inextricable from defining what the economic reform itself is all about, it is little wonder that the term is riddled with ambiguity.

Judging from our conversations in China in the early 1990s about the meaning of ‘entrepreneur’, it had two basic connotations which conflicting interpretations appear to share. First, it described the occupant of a top managerial role in an enterprise or company, which tends to exclude middle-level enterprise management but also self-employed business people in small-scale individual or household businesses. Second, it did carry some of the connotations of the English term ‘entrepreneur’, through its association with the notion of qiye, (enterprise). The latter, while referring to a concrete entity such as a factory or company, also carries the idea of an autonomous, active entity. Indeed, the process of transition from the enterprise as an ‘abacus bead’ in the central planning system to an independent, market-oriented economic actor is referred to as qiyehua, (enterprisation).

Yet in official discourse, ‘entrepreneur’ has not only been descriptive but inspiratory and honorific. For example, the managers of township and village enterprises are not all described generically as entrepreneurs in official parlance. For example, the members of the Shenyang TVE Entrepreneurs’ Association are selected by an evaluation committee which uses criteria defined by the municipal TVE Management Bureau (including the success of the enterprise, its contribution to the state and the locality, and its scale and level of output). ‘Entrepreneur’ is an honorific title conferred on a small percentage of TVE managers who meet these criteria, those known as ‘people who take the lead’ (daitouren); the title is only conferred for one year and may or may not be renewed. All other TVE managers are referred to (p.189) simply as ‘managers’,jingli or ‘bosses’, laoban. The use of ‘entrepreneur’ as an honorific finds a parallel in Taiwan where the term also applies to successful and relatively important business people, not to business people as a whole.

As the pace of institutional change in the Chinese economy has accelerated in the 1990s, so the business environment has rapidly diversified and the language of business is changing accordingly. Thus the term ‘entrepreneur’ is but one of a proliferating number of words to describe business people. While the manager of a company (gongsi) is usually referred to as a ‘manager’ (jingli), the manager of a factory would be called a ‘factory head ’ (changz-hang). There is also a collective noun coming into use—jingyingzhe, literally ‘managers’ or ‘operators’—which is being used to denote a new classification of managers who are operating independently of the state, in leased state enterprises, in independent as opposed to government-affiliated collectives and in private enterprises.14 A new language of industrial relations is also taking hold: for example, the bosses of private firms are now referred to collectively as guzhu (employers) and their enterprises are called yongren danwei (user units). The Chinese language is changing to accommodate the increasing complexity and novelty of economic institutions and their denizens which can only partly be captured by the term ‘entrepreneur’. Since we are sensitive to the heterogeneity of the rising new Chinese business class, therefore, we wish to go beyond the confines of ‘entrepreneurs’ to investigate, for example, self-employed business people who do not normally qualify for the designation.

This contradiction between official categories and diversifying socio-eco-nomic realities is also reflected in the sphere of organization. As business— and therefore business people—becomes more complex, the state seeks to incorporate it institutionally on the basis of organizational categories which are increasingly being undermined by the impact of economic reforms. This process is evident in the emergence of a new generation of business associations which have been intended to organize and incorporate the business elite on the basis of distinctions between different categories of ownership. While these categories have themselves been evolving in a vain and confused attempt to keep pace with the changing nature of China's economic institutions, certain key sectors stand out: first, the public sector including state and large-scale old-collective enterprises; second, a private sector involving small-scale individual enterprises (getihu) and larger-scale private enterprises (siying qiye); third, an intermediate, and rather murky, new-collective sector, the most dynamic portion of which is composed of rural TVEs; fourth, the foreign-invested sector involving joint ventures and wholly-owned foreign enterprises. Given our primary focus on the urban/domestic sector, we shall concentrate here on (p.190) the emerging business class in the first two categories, with some brief supplementary information on the latter two to provide the reader with a broader picture of the evolution of Chinese government-business relations.

Senior Managers in Public Enterprises

1. Their social identity. This group is the one most clearly labelled ‘entrepreneurs’ by the Chinese authorities. However, since many of them are relics of the central planning system, they may not be entrepreneurial in any Western sense of the word. If we focus on the key state sector, industry, there were 74,066 state enterprises in 1992 (18 per cent of the total number of industrial enterprises). As these statistics suggest, state enterprises are relatively large and the official category of ‘large and medium enterprises’ (numbering 16,903 in 1992, about 4 per cent of the total number of enterprises) would be virtually all state-owned (SSB 1993: 374). The top managers of this sector within a sector have constituted a socially distinct and politically influential group over the past decade.

Their relationship with the state has been contradictory. On the one hand, the state has been heavily dependent on state industry for revenue: as of 1991, 71 per cent of total state revenue came from state enterprises and 57 per cent from industry (SSB 1992: 365). While these ratios were declining by the early 1990s, about one-third of state industrial enterprises were estimated to be losing money and this was a drain on the state treasury. In 1991, for example, state industrial enterprises paid about 126 billion yuan in taxes, while the estimated total losses of unprofitable enterprises amounted to 36.7 billion, 29 per cent of the tax revenue from industry (SSB 1992: 382). While some of these losses are planned or ‘policy’ losses, the state has had a clear interest in moving enterprises towards profitability by reducing price distortions and putting state enterprises on a more commercial basis.

On the other side, while the managers of state enterprises have struggled to adjust to a more commercial environment and raise the profitability of their enterprises, they have remained dependent on the state for a number of reasons. Those in charge of loss-making enterprises need to be cushioned in the transition towards profitability. While those in more profitable enterprises are more likely to seek greater independence, they, like their loss-making counterparts, also rely on the state to support them in the transition to commercial viability: for example, by smoothing the process of reducing levels of overstaffing by helping them to place redundant workers; by subsidizing the burden of pensions for ageing workforces; or by providing low-interest credit to pay for technical upgrading and re-equipping to introduce new products.

This ambivalence is revealed in our 1992 survey of managers in the public sector in the cities of Shenyang and Nantong. Of those interviewed, 43 per cent thought that the state should continue to give subsidies to loss-making (p.191) enterprises because the bankruptcy of state enterprises would be an unacceptable social cost (whereas only 21.5% of the total admitted to being managers of loss-making enterprises). At the same time, however, when asked if they thought the problem of bankruptcy was a consequence of government controls over the enterprise, three-quarters agreed. Moreover, when asked what they considered the most difficult aspect of their job, about one-third indicated that this was the problem of interpersonal relations outside the enterprise, notably those with their administrative superiors (compared to 26% who pointed to problems in selling their products and 23% problems of interpersonal relations within the enterprise). Even more revealingly, when asked to react to alternative opinions about the relationship between their enterprise and state superiors, 34 per cent thought that government departments intervened too much in the affairs of enterprise while only 14 per cent thought that the government was not giving them enough support. Yet the response of the largest portion (43 per cent) indicated that the issue was not a simple question of support as opposed to interference since they felt that the government was not doing enough of what it should do and doing too much of what it should not.

These ambiguities reflect the transitional nature of managers of state enterprises and big collectives as a social group. Of those interviewed as ‘main leaders’ in their units, about four fifths were under the age of 50 and a third were under 40. They were also relatively well educated, 67 per cent being graduates of colleges or polytechnics. Management was also taking on the status of a separate career (for example, one-third of managers interviewed said that their previous post had also been in management) while new recruits tended to be drawn from the ranks of the technical professionals (29 per cent). By contrast, only 7 per cent had come from the armed forces, 10 per cent from Party/government organs and 4 per cent from the ranks of manual workers. At the same time, however, over 90 per cent of them were Party members and 78 per cent had been been appointed to their jobs by higher state authorities.

This transitional heterogeneity is also reflected in their attitudes to their job. While it is significant, as reported above, that 43 per cent thought that the state should continue to give subsidies to loss-making state enterprises, it is also significant that 57 per cent disagreed. At the same time, nearly three-quarters thought that the main reason for enterprise losses was in fact bad management and the problem should be tackled by changing the management. Moreover, over two-thirds thought that the realistic way out for loss-making enterprises was to be ‘pushed into the market and become real producers’. We can detect a strong element of entrepreneurial initiative here, also reflected in their attitudes to what they consider to be appropriate remuneration for professional managers. For example, when asked if they agreed that managers of a profit-making firm should earn a lot more money (at least three times more) than ordinary workers and staff, 72 per cent agreed and only 13.5 per cent disagreed. (p.192) Moreover, when asked if their present salary represented a suitable reward for their work effort and responsibility, 69 per cent said it did not.

At the same time, managers seemed to be strongly rooted in their own enterprises. For example, though over two-thirds were discontented about their salaries, when asked what they would do about this, only 4 per cent of those who replied said they would move to another enterprise. This partly reflected the familiar phenomenon of welfare provision at the enterprise level: 80 per cent of these managers lived in housing provided by their own unit or another unit (for example, that of their spouse), while only 6 per cent owned their own dwelling and 1 per cent were renting privately. Over 90 per cent of them enjoyed free medical services, guaranteed pensions and sickness/injury insurance as a consequence of their status in their unit. Their reluctance to leave the enterprise probably also reflected a commitment to the ‘enterprise community’; not only were they committed to increasing their firm's profitability, but also evinced a more than declaratory interest in improving the all-round well-being of their existing workforce, in ways comparable to those reported by Walder (1989a: 249–253) in his study of factory managers in the reform era.

Given these contradictory external pressures, their ambivalent motivations and their continued dependence on state support, it is unsurprising that state enterprise managers have developed a sense of common identity which has taken on the characteristics of an interest group and, at times, a pressure group. They have received recognition as such from Party/government leaders who have consulted publicly with them over major issues of industrial reform, such as the Contract Responsibility System, the Factory Director Responsibility System and the Enterprise Law, since at least the mid-1980s onwards. Unsurprisingly, moreover, political leaders of different political stripes have sought, through surveys and ballots of managers, to portray them as supporters of either more radical or more cautious versions of reform, reflecting their own political selectivity and the political heterogeneity of the managerial stratum.15 After the 4 June Incident, the Party's new conservative leadership tried to cement a relationship with the managers of public enterprises, viewing them as a relatively reliable base of support in their attempt to re-establish political control and credibility after the shocks of 1989. In Liaoning province, for example, the provincial Party secretary, Quan Shuren, reflected the Party's attitude to managers of large state enterprises when he hailed them as zhengzhijia (politicians) as well as qiyejia (entrepreneurs) who ‘should note (p.193) not only their responsibility to stabilise the economy, but also their political responsibility to stabilize the society’.16 Yet CCP leaders were also aware that this was a constituency which needed placating because state enterprises were suffering from the effects of the austerity programme launched in late 1988 which depressed market demand, squeezed supplies of credit, and made them vulnerable to lower-cost producers in the non-state sector. Special efforts were made to show the leadership's concern for the particular problems of public-sector managers. For example, in early 1990 Prime Minister Li Peng and Minister of the State Planning Commission, Zhou Jiahua, invited a group of managers to the top leadership compound at Zhongnanhai to discuss the problems facing their enterprises and ways to solve them; and this consultation procedure was replicated at local levels throughout the country.17

Managers took advantage of this atmosphere to make their concerns known. At the annual meeting of the National People's Congress in March 1990, for example, panel discussions on industrial issues almost turned into ‘meetings for pouring out grievances’ on the part of managers of state enterprises, particularly of large ones. For example, the manager of the famous Feige (Flying Pigeon) Bicycle group in Tianjin complained about unfair competition from other manufacturers who were being featherbedded by local governments, about official restrictions on the price of Feige bicycles (the price of which had only been allowed to increase by 26 yuan over 40 years) at a time when the prices of raw materials were soaring, and about the distorting effects of the dual price system which allowed subsidies to their competitors with less famous brand names. A manager from the Changchun motor vehicle plant from the North-Eastern province of Jilin complained that, because of the economic retrenchment policy, his company could not sell its cars because many enterprises did not have the money to update their fleets; he argued for special policies to encourage companies to buy new cars by reducing the consumption tax and improving depreciation allowances.18

Managers in large-medium state enterprises seem to have found it relatively easy at this time to gain the ear of the authorities, whether they be Party leaders or bureaucratic superiors. This impression is reinforced by our survey. When asked, for example, whether they could make their views known to higher authorities concerning a policy which affected their interests, over 80 per cent indicated that they could do so either through special investigation meetings involving higher officials or through immediate superiors in their supervisory industrial bureaux. As many as one-third said that they could also raise such issues through the people's congresses or people's consultative congresses. By (p.194) contrast, when asked whether they would do so through an association to which they belonged, only 28 per cent replied in the affirmative, which suggests that, as yet, the new associations established to organize and represent enterprise managers in the public sector are of limited value to their members. Let us look at the nature and evolving role of these new organizations.

2. Associations of public sector managers. At both national and local levels, associations have emerged which reflect the particular social identity and policy concerns of public-sector managers, whether these be in the state sector proper or the quasi-state large-collective or old-collective sectors. Indeed, the first national social organization to be established (in 1979) was the Chinese Enterprise Management Association (CEMA) which was set up on the initiative of high-ranking state officials—notably Yuan Baohua, former head of the State Economic Commission—and a senior economist, Ma Hong. During visits to Japan and Europe they had observed the important role played by business associations there and had proposed the establishment of a similar organization in China. The organization has actually had two ‘signboards’: as CEMA, its members are enterprises; as the Chinese Enterprise Directors’ Association (CEDA), its members are individual enterprise directors. The two organizations had existed separately until 1988 when they were fused ‘for convenience’, but in many localities the two organizations continued to operate separately. This separation is attributed to the fact that, while CEMA embraced all enterprise managers within its ambit, CEDA represented just enterprise directors who, as an elite group, preferred to have their own organization.

As a semi-official association, CEMA/CEDA's official connections have been impressive. As of 1992, for example, the national Association had senior state officials such as Yuan Baohua and Zhang Lianning among its top leadership and boasted vice-premiers Zhu Rongji and Tian Jiyun as advisers.19 The national-level organization squarely represented large state enterprises and their directors. In fact, official regulations limited its membership to large and medium state enterprises with ‘a few representative TVEs’, which were reportedly eager to join to ‘get more information and make more friends’ (i.e. business contacts). The national leadership of CEMA reflected this constituency: its vice-heads included the general manager of the vast Daqing Oil Administration, the Changchun Number 1 Auto Plant, the Capital Iron and Steel Company, and the Anshan Iron and Steel Complex. While CEMA only had 700–800 direct members, other state enterprises were indirect members of local branches in 200 cities and thirty provinces and in twenty-six national and local sectoral associations (for example, EMAs in the Chinese machinery, metallurgy, coal and petrochemicals industries). The national CEMA/CEDA is an organization with some institutional substance: it has its own building with over 200 staff members; it runs a training centre for senior managers and (p.195) economic officials; a consultancy centre with major clients such as Air China, the Northeast Pharmaceutical Enterprise Group, the Zhongyuan Pharmaceutical Plant, and the Shanghai Navigation Company; it has a research department which ‘sums up management experience and absorbs advanced management experience from abroad’; it runs a national computer network to link large enterprises and provide information on technology, government policies, economic laws and regulations, and macro-economic trends; and has a publishing company which produces books and journals on Chinese and foreign business trends (including such titles as Chinese Enterprise News and Global Business Information).

Thus when the national Association's officials, interviewed in 1992, claimed to exercise significant influence over government policy, we were inclined to believe them, given their access to high officials and their considerable institutional resources. As in the case of many other semi-official associations, autonomy is exchanged for access. CEMA officials saw the presence of high officials in the Association's leadership not as a sign of subservience to the state but of privileged access. The role of Yuan Baohua was singled out as particularly important (for example, he had monthly meetings with managers from the localities and passed on problems to relevant government agencies either through formal channels or personally by telephone). The Association claimed to play an important role in policy-making: for example, in the early 1990s, it contributed several articles to the regulations on the new share system introduced to transform the property relations of state enterprises; during the early and mid-1980s, it had been consulted when regulations on increasing enterprise autonomy were being drawn up, and was involved in discussions about the Bankruptcy Law and the Enterprise Law (although it was not involved in the actual drafting of these laws).

CEMA/CEDA can be seen as a classic case of an incorporated, semi-official, social association, a hybrid entity which embodies a close linkage between a powerful social constituency and those sectors of the state which are involved in and charged with regulating that constituency. The Association's official affiliated agency guakao danwei had changed over time (initially the State Economic Commission, then the Economic Structural Reform Commission, and, from 1991 on, the State Planning Commission), but it also had strong links with the State Council's Office of Economics and Trade, which had a representative among the Association's leadership. This braided relationship is reflected in the Association's financial and staffing arrangements. In 1992, it received a fiscal allocation of about l.2million yuan per year which was earmarked for certain tasks undertaken on behalf of the government, mainly in the area of training and research. The rest of its income (the bulk, in fact) came from its own profit-making ventures (in consultancy and publishing), donations from abroad, and membership fees, which were instituted in 1990. In terms of its staffing, moreover, part were on an official bianzhi (establishment), assigned by the Ministry of Labour and Personnel and therefore on the state (p.196) payroll, while part were on contracts paid by the association itself. However, it should be added that its role as a link between state and society went beyond the specific constituency of public-sector managers, since it reached out to incorporate other relevant constituencies. The national Association's 400 councillors included representatives from relevant experts and academics and representatives of trade unions and brother associations such as the Chinese Quality Association and the Chinese Transportation Association.

CEMA/CEDA is an organization of some weight, with a strong sense of identity and awareness of its future role and direction. As we saw earlier, all social organizations were coming under pressure to adapt in order to survive in the new environment of accelerated reform in the early-mid-1990s. The CEMA/CEDA was no exception and was particularly well situated to do so. Even though the impetus of accelerated reform was relatively recent when we visited the association in September 1992, plans were already afoot to increase its power and autonomy. Their relationship with their affiliated state ‘minder’, the State Planning Commission, was already described as fairly loose and the SPC did not interfere much in their activities. Moreover, association officials were asserting their intention to become completely separate from the SPC in the near future. The future strength of the association thus depends on its ability to maintain and expand its membership by providing useful services and to generate revenue through its own enterprises. Plans were under way, for example, to set up a China Enterprise Mansion in the Special Economic Zone of Shenzhen as a ‘window of our organization’ to the outside world which, it was hoped, ‘should bring in a lot of money’.

CEMA/CEDA is thus a case of an association which, while established on state initiative and with state support, has shown a capacity to evolve into a separate, more autonomous organization capable of mediating between government and the state sector of the economy. However, its future depends heavily on the future of its constituency—large and medium state enterprises—which were coming under increasing pressure in the mid 1980s to reform themselves radically or go to the wall. To the extent that they survive as a distinctive component of the Chinese economy, the role of CEMA/CEDA is likely to be important, acting as a true business association in the sense of taking on various regulative responsibilities formerly assumed by government, providing services to its members and representing their interests to government. To that extent, it would be fulfilling the intentions of its original founders in 1979.

So far we have been discussing CEMA/CEDA’ ‘peak’ Association at the national level. But does it operate at the local level? We investigated the Shenyang Entrepreneurs’ Association (SEA) which demonstrated some important differences from the national organization. First of all, it had very little to do with it: for example, of the SEA's total annual revenue of 80,000 yuan in 1991, only 1,000 yuan was sent to the national organization, which, SEA officials claimed, ‘doesn’t do anything for us’. Second, unlike the national (p.197) Association, this local association was set up from below, on the initiative of 150 local managers in 1984. A particularly crucial role was played by one large state factory, the Electric Cable Plant, which gave them a free office, payed the salaries of their officers and subsidized them to the tune of 1 million yuan between 1984 and 1992. The chairman of the Association was a former director of the Electric Cable Plant and one of its vice-chairmen was the plant's current manager. Unlike the national Association, it received no financial allocation from government, but like the national organization it had important local officials as honorary officials. According to SEA officials, the main function of the Association was to strengthen managers as a group. This involved improving their professional quality through training programmes, but, more importantly, protecting the interests of large and medium state enterprises in Shenyang theatened by the reforms (Shenyang was one of the first test locations for bankruptcies). This involved helping out members in difficulties, either by mobilizing other members or by seeking the help of government.

Given the heavy presence of large and medium state enterprises in the city's economy, the Shenyang Entrepreneurs’ Association has a strong constituency and is likely to wield considerable influence over industrial policy-making at the local level. It differs from its national counterpart in having more autonomy and being more genuinely representative of its constituency. Like its national counterpart, however, it represents a sector under threat and is thus in danger of losing much of its previously privileged position and distinctive characteristics. To that extent, both national and local branches of CEMA/ CEDA will need not only to achieve greater distance from state agencies, but also to reconsider their constituency, notably by seeking to represent the interests of professional managers across the economy as a whole by reaching out more actively to embrace senior managers in non-state sectors.

The Urban Private Sector

1. Their social identity. Here we are dealing with the owners and/or managers of small-scale, self-employed individual or family businesses (getihu) and larger private enterprises (siying qiye). The official distinction between these two layers, which was instituted in 1988 but only patchily enforced until the early 1990s, is based on the number of employees, with private enterprises having more than seven.20 It is difficult to estimate the exact extent of this sector in the early 1990s because the proportion of officially designated collective enterprises which are in fact disguised private enterprises is impossible to estimate. Even if we discount this hidden increment, however, the (p.198) growth of the private sector was still impressive enough. To add to our earlier statistics, between 1979 and 1992, its gross output expanded at an average rate of 18 per cent per annum and its workforce by 11 per cent. The number of private enterprises was projected to rise from 15.3 million in 1992 to about 30 million in 2000 producing 20 per cent of national output.21

In the early 1990s, it was the larger-scale private enterprises which were expanding particularly rapidly, especially in the southern coastal provinces of Zhejiang, Fujian, Guangdong, and Hainan. This was a second wave of private enterprise, which began to gather strength in the late 1980s and was of a larger scale and more sophisticated than the first wave of the early to mid-1980s which had largely been composed of small-scale enterprises run by individual craftspeople, unemployed youth, or former workers in public enterprises, who had generally low levels of education and small amounts of capital. This transition reflected more relaxed official policies towards the expansion of the private sector, the ability of successful individual enterprises to increase their scale of operations, a diversification of channels for mobilizing capital for larger-scale ventures, profitable opportunities to purchase or otherwise occupy state enterprises and assets, and an increased supply of educated professional manpower from the public sector, in the form of increasing numbers of former government officials, technical personnel, and intellectuals such as academics who were ‘plunging into the sea’ of business (xia hai).

A survey of 117 entrepreneurs in large private enterprises, conducted in mid-1992 by the Chinese Market Survey Institute in selected areas of five provinces, found that 43 per cent had worked in government offices or state enterprises, 45.3 per cent had senior-middle school education, and 25.64 per cent higher education, with the amount of capital they controlled correlating with their level of education.22 In the northern province of Liaoning, the Party's Organization Department reported that over 10,000 officials had left Party/government organs in the province during 1991 and 1992, partly because of the financial lure of private-sector opportunities and partly because of the mounting campaign to decrease the numbers of government employees—many of them felt that they should ‘get going white the going's good’.23 As of the end of 1991, an officially acknowledged number of 200,000 Party members—4 per cent of total membership—had registered as private business people, comprising 8 per cent of the latter's total number nationwide, and the Party responded by attempting to establish Party organizations where business people congregated, for example, in commercial centres and district fairs.24 It (p.199) also was becoming increasingly common for employees to moonlight between jobs in the government/public enterprise sector and the private sector (Unger 1993), and for Party/government officials to set up private businesses by various informal means. Given that these trends were accelerating rapidly in the boom of the early to mid-1990s, China's private sector was becoming an increasingly influential and pervasive element in the Chinese economy nationwide.

During the 1980s, the era of the first wave of petty enterprise, private business people as a group found it difficult to establish themselves as a stratum which enjoyed both stable political recognition and social esteem in the eyes of the general urban population. Ideological strictures on the private sector persisted and official policies have fluctuated between periods of encouragement and restriction. Private business experienced an ambiguous relationship with state institutions, being treated variously by local officials as geese laying golden eggs and chickens ripe for plucking. Given this ambiguous environment, many business people resorted to devious means to carry on their activities and this reinforced popular conceptions about their sharp practices and ill-gotten gains, strengthened by jealousy (‘red-eye disease’) about their often very conspicuous wealth. These attitudes can be interpreted as an unsurprising result of an urban economy in transition, reflecting tension between the denizens of a relatively free-wheeling private sector where opportunities exist for rapid wealth-creation and a public sector still trapped in the economic limitations of the past, employees in the latter seeing the former as both threatening and exploitative.

However, as the second wave of larger-scale private business gathered pace in the early 1990s, official policies and officials themselves became more accommodating, and the balance between ownership sectors in the economy gradually shifted, the task of creating an acceptable social status for private business was becoming easier. The private sector began to establish itself more credibly as an alternative channel of social mobility not merely for ordinary people with acumen, but also educated people with professional skills and state officials with power. The transformation of the social identity of urban business is thus being conditioned by the overall ideological and structural changes brought about by economic reform.

2. Associations and the private sector. Given the distinctively threatening potential of private enterprise in a socialist market economy, the state moved early to encapsulate and control the two major waves of private enterprise, through the establishment of Individual Labourers’ Associations (geti lao-dongzhe xiehui, also translated as Self-Employed Workers’ Associations) at both national and local levels and Private Enterprises Associations (siying qiye xiehui) at local levels. We will discuss these two organizations separately.

The Individual Labourers’ Association (ILA). Though the national ILA was not set up until 1986, local organizations were established well before that. (p.200) The exact timing and nature of these processes varied from locality to locality. As we saw earlier, in Xiaoshan county/city in Zhejiang province, for example, this process began in the early 1980s with the registration of individual labourers with the local Industrial and Commercial Management Bureau (ICMB), reportedly on the initiative of the business people themselves. In 1983, however, under the prompting of State Council regulations, the nascent association was formalized and placed under the leadership of ICMB, with an ICMB official as its secretary and the vice-head of ICMB as its head. Membership in the association was a compulsory consequence of formal registration as an individual or self-employed business getihu. However, ILA remained a fairly independent organization until 1986 when its links with ICMB and other state agencies were increased.

This process of grass-roots initiative and then state encapsulation seems to have been followed in other areas: for example, the first self-employed association in the country was reportedly established in the north-eastern city of Harbin at the initiative of 800 local business people. As the ranks of small-scale businesses have expanded, the state has recognized the need to control and regulate their activities, but has faced a difficult task in doing so. In Xiaoshan, for example, the membership of ILA had reached 22,144 households involving 41,630 people by 1991 and their activities had spread across industry, transport, communications, commerce, catering, and repairs. This growing complexity means that a local ICMB depends on the co-operation of its local ILA (and of those business people who agree to help run it) to help manage the sector, which gives the Association the potential for a degree of independence. In particular, ILA can play a significant role in resolving conflicts between local government and small-scale private business. In one dramatic incident in early 1994 in Zhuhai city, Guangdong province, for example, sixty-eight shops in a market district went on strike when the district ICMB tried to increase rents on their premises. When the higher-level city ICMB sent officials to investigate and mediate the dispute, they consulted with ILA as part of the process of settlement, which ended with the rent-hikes being rescinded.25

With this kind of intermediary function, ILA can act to some extent to protect and advance the interests of its members, particularly in regulating the terms of market competition, and helping them either gain access to, or avoid the depredations of, officials in both ICMB and elsewhere. As such, it cannot be dismissed as a purely official social organization. However, while the organization can be described as semi-official, the needs of state regulation and control have remained dominant and individual business people have not been allowed to establish their own alternative associations. In the short term at least, one is inclined to be sceptical of Susan Young's argument (1992: 20) that ‘there is potential for ILA to become quite a significant lobby for private (p.201) sector interests’, though this potential may vary across localities. In his case-study of private business in a district of Chengdu city in Sichuan province, Bruun notes (1993: 12) that ‘to stand up for one's rights using the Association as a mouthpiece was never attempted in the area’ and recounts that an increasingly common complaint among private business people was that ‘we have no one to speak for us’. In spite of the fact that ILA is only one agency in the network of regulation (for example, other state agencies such as the Public Security Bureau and neighbourhood organizations such as the street offices and the residents’ committees also play a role), given the spatial and sectoral complexity of urban small-scale business, there is pressure on the self-employed to pursue their collective aims by other means. Where formal means are unavailable or inadequate, then informal methods will be used, notably good guanxi with relevant officials. However, while these clientelist ties may prove beneficial to the individuals concerned, they erode the authority of local state agencies and make the task of enforcing formal regulations that much harder.

Private Enterprises Associations (PEA). The foundation of these organizations reflects the decision to grant official recognition to, and extend official control over, larger-scale private enterprises which was ratified at the Thirteenth Congress of the CCP in October 1987. The recognition of ‘private’ in addition to ‘individual’ was also given formal status through an amendment to the state constitution in April 1988 (Kraus 1991: 19–21). In actuality, private enterprises were already being set up and recognised by local governments in the mid-1980s and the impetus towards setting up local associations had already begun. In the case of Xiaoshan city, for example, both business people and ICMB officials first proposed the idea of an association as early as 1986, though it was not formally established until 1988. Xiaoshan was a relatively early case and the progress towards making official distinctions between ‘individual’ and ‘private’ business and setting up local PEAs was much slower; for example, a PEA was not set up in Shanghai until early 1992.26

Like ILA, the main function of PEA is as a mechanism to control and regulate private business. From the poini of view of business people themselves, it provides them with some form of official recognition and protection in a social and political environment in which ‘private’ is still regarded with suspicion or hostility. It also provides private business with some assistance in dealing with government in a situation in which it still depends heavily on state support, the public sector still receives preferential treatment, and private enterprises are still the victims of negative discrimination (for example, in getting bank loans or access to scarce raw materials or land). In chapter 5 we (p.202) cited the case of a private business man in Xiaoshan who asserted that his enterprise had actively wanted the local government to set up a PEA because ‘private enterprises did not have their own government department’. By contrast, a private business man interviewed in Shenyang had not been convinced initially of the value of joining the PEA: Originally, I didn’t join any association; then the district PEA came to see me and said Υou’re such a big enterprise. How come we didn’t know about you? Come and join the association.’ Little did I think that as soon as I joined, it would prove really helpful.27

He then related a case in which PEA had helped him to deal with problems he was having with the local Technical Supervision Bureau which wanted to close the company because it did not have a proper production certificate. However, these attitudes do not necessarily represent the views of most business people, some of whom saw this association, indeed all associations, as ‘wasting our time and wanting our money’. Moreover, there is always the consciousness of a lack of alternatives to official associations. For example, the director of a private poultry farm which was a member of PEA in the northeast recalled: ‘Last year, some people came to see me and said that we poultry farmers should get organized. That way we could stabilize sources of feed and control market prices. I said, forget it! If you organize, do you want to set up a rival show to the Communist Party?’.

The CCP leadership has not established a PEA at the national level, where an organization already exists to represent the private sector, namely the All China Federation of Industry and Commerce (ACFIC). This organization had been established in 1953 at a time when the large-scale private sector still existed and the Federation was a bridge between them and the Party and a mechanism for implementing the industrial policies of the new regime. The Federation was revived in 1979 and, by the early 1990s, had a total membership of nearly 700,000 nationwide, divided roughly half-and-half between pre- and post-1979 members (the former being managers or owners of private enterprises expropriated in the mid-1950s). Officials of the Federation claimed that it was not merely a social organization but also a people's organization (renmin tuanti), with a ‘new’ membership of 340,000 composed of enterprises, individuals, and associations of various types, including local ILAs and PEAs and local trade associations, their main constituency being the various non-state sectors (private, self-employed, TVE, and joint ventures). Besides acting to integrate the new non-state sectors, the Federation formed a bridge between the old and new generations of membership and, as an All-China organization, provided a link with business in Hong Kong and Macao through its members there. Though still linked closely with state organisations through overlapping leadership and financial support, its officials claimed, ‘we (p.203) have high political status; we are part of the high-level political consultation process (canzheng yizheng)’, involving the right to make inputs into new laws and even to participate in the drafting of new business regulations (for example, on the share system being introduced into state enterprises in the mid-1990s).28

ACFIC has increasingly become a source of countervailing organization in the private sector in relation to officially sponsored associations such as ILA, PEA, and the Chinese Association of Foreign Invested Enterprises. This was already visible in the fast developing coastal zones during the 1980s. David Wank has documented the case of Xiamen, a coastal city in Fujian province opposite Taiwan and site of one of the four Special Economic Zones where there was competition between the local branch of the Federation and the local Industrial and Commercial Management Bureau over sponsorship of a new association to represent private enterprises. The Federation, which had adopted its pre-revolutionary name as the Xiamen City Chamber of Commerce (Xiamen Shi Shanghui), was itself a fairly independent entity by the mid-1980s and in 1988 sponsored the establishment of a Xiamen City Civic Association of Private Industry and Commerce (Xiamen Shi Siying Gongshang Gonghui) which ‘lobbied the city government on behalf of local private entrepreneurs’ (Wank 1995: 5). By so doing, the Chamber of Commerce was assisting entrepreneurs in their effort to found an association which was not sponsored by, and subject to the control of, the city ICMB. ICMB retaliated by suppressing the Civic Association and establishing its own association in 1990; the Chamber of Commerce in turn withdrew from the fray over the Civic Association and concentrated its organizational initiatives on drawing private enterprises into new sectoral trade associations.

As the non-state sectors expanded in the 1990s and the 1997 date for incorporating Hong Kong into the national economy drew nearer, ACFIC showed signs of flexing its muscles. More local chambers of commerce were established, most notably in Guangdong province where a provincial Chamber of Commerce for Private Enterprises was set up in late 1994.29 One of the vice-chairmen of the national Federation, Sun Fuling, stated in 1993 that it ‘hopes to be a spokesman for China's private economy’, not the least because ‘many private business people have joined its ranks after failing in their applications for membership of the CCP because of ingrained prejudice’.30 To this end it was attempting to forge links with, and breathe life into, those political institutions which are emasculated relics of the era of political coalition in the early years after the CCP came to power, notably the Chinese People's Political Consultative Conference and the eight ‘democratic parties’. Though these links are weak as yet, the rapidly expanding role of the (p.204) private sector, the growing influence of local business interests (particularly in the form of trade associations), the increasing role of overseas Chinese business in the domestic economy and the declining legitimacy and institutional effectiveness of the Party/state have opened up the glimmerings of an alternative centre of institutionalized political power.

The Trade Association:

The New Arena of Business Organization

So far, we have been talking about business groups and associations in terms of the official distinctions between ownership sectors. Apart from the two sectors discussed above, associations have also been set up to incorporate the new-collective sector, notably national and local associations of Township and Village Enterprises and Township and Village Entrepreneurs,31 and national and local Associations of Enterprises with Foreign Investment.32 However, the boundaries between these ownership sectors have been breaking down and linkages between them increasing. Moreover, the previous unilinear and hierarchical link between a specific state agency and a specific sector set of enterprises has also been crumbling as the number of government agencies involved in a particular sector has proliferated. The form of business association which has emerged as the dominant organizational response to these structural changes in the politico-economic system is the trade association. Along with it has emerged an increasingly explicit and deliberate corporatist conception of government-business relations based on sectoral co-ordination and regulation. Since we have discussed these associations in detail in earlier chapters, we shall confine ourselves here to general remarks about their evolving significance on the Chinese institutional scene.

Trade associations have been a feature of the reforms since their inception, (p.205) emerging in industry at the local level as early as 1980. In the mid-1980s, particularly in large cities such as Shanghai and Wuhan, they were one element in a wider programme of reforms in the system of industrial administration, taking on some of the functions of previous administrative companies which had until then served as intermediaries between state industrial departments and enterprises. The pace of growth slowed during the period of economic austerity between 1988 and 1991 but picked up again thereafter. By 1993 there were an estimated 160 national and 1,000 local associations and their numbers were increasing rapidly. Most significant was a move to convert certain central light-industrial ministries into general associations, such as a Textile General Association. In the eyes of Chinese analysts and officials, trade associations were distinctive in that they functioned as instruments of both economic and governmental integration, as an academic research team from the Chinese Industrial Economics Association pointed out in a 1993 study:33

According to our investigation, trade associations are characterized by the fact that their members come from different departments, different regions and enterprises of different ownership. Members of trade associations at the national level usually come from more than ten or twenty ministries and more than twenty provinces. Eight of 14 national-level associations investigated have members including four types of enterprises: state-owned, collective, TVEs and enterprises with foreign investment.

They also embody an evolving compromise between the interests of both state and business which are both divergent and overlapping. From the point of view of business, they allow greater flexibility, access and initiative than organizations such as ILA or PEA. From the state's point of view, they offer a new way to control and regulate a more complex and dynamic economic system and to come to terms with the interests it is spawning. In the eyes of its Chinese advocates, it represents a new way forward in government-business relations with distinctively East Asian characteristics. For example, the head of the newly established national Textile General Association, Wu Wenying, pointed to the parallel with Japan:34

Among developed countries, the Japanese model of associations is relatively mature. From the Second World War on, Japanese enterprises have grown up under a managed economy and relations between enterprises and government have been extremely close. Japanese associations and federations of all types represent the interests of both government and business, forming a layer of management and co-ordination between government and enterprise. This distinctive characteristic makes sectoral management in Japan very different from that in other developed countries. In Europe and America, trade associations only represent the interests of the trade and do not take responsibility for planning its development or carrying out the government's relevant industrial (p.206) policies. In certain important respects, the Japanese model of trade management is much more worthy of emulation.

Yet, as Wu admits, even a model derived from East Asia is difficult to transfer to the Chinese situation and there was far from unanimous support for it. The present conception is heavily top-down and there is a need for a rebalancing of power in favour of business interests. Moreover, the attempt to impose such clear-cut forms of incorporation on a business scene which is diversifying so rapidly and changing so kaleidoscopically is likely to prove very difficult, if not impossible.


the Rise of the New Chinese Business Class and the Dynamics of Business Associations

The emergent Chinese business class, including both owners and managers, is diverse and fragmented, looking both forwards and backwards. In part, this reflects the evolution of new strata in an economy in transition between two radically different socio-economic systems. Its segments have different relationships with the reform process. Many entrepreneurs in public enterprises are fighting a rearguard action to protect their previously privileged position and soften the effects of the reforms, while business people in the private, foreign-invested, and new-collective sectors are seeking to extend and legitimize their activities and establish a more level playing-field for competition with the public sector. In part, this segmentation also reflects efforts by the state to separate and encapsulate specific sectors by policies and organizational means.

State agencies have sought to establish new forms of regulative control over business through corporatist associations based on ownership or trade sectors. Yet the effectiveness of these new institutions is being undermined by the very rapidity of structural change in the economy and by the consequent proliferation of conflicts of interest—between state agencies and business interests, among state agencies and business interests themselves. On the one hand, the specific constituencies of officially sponsored associations are seeking greater autonomy and influence within these organizations.35 On the other hand, the monopoly position of officially sponsored associations is increasingly challenged by rival organizations, semi-official or unofficial, which view existing associations as too restrictive and claim to represent the interests of business (p.207) more effectively. Emergent civic associations and chambers of commerce, representing the non-public sectors and more assertive trade associations which straddle different ownership sectors, are signs of the development of more autonomous forms of business organization which are potentially influential components of a new sector of civil society.36 Since the changes in Chinese society and economy are moving in ways destined to strengthen the hand of the groups which these associations embody, we can expect that the challenge which they pose to officially dominated business associations will increase.

To summarize, the relations between state and business in China's rapidly changing socio-economic environment are complex and contradictory, containing elements of co-operation and conflict, control and contestation, incorporation and resistance, conservatism and innovation. This judgement is based on analysis of the links between state agencies and new forms of business organization. However, this particular institutional nexus is only one element of a more complex, three-dimensional network of social relations between state and business. A second element comprises the institutional remnants of the central planning system, the old vertical links between enterprises and their superior departments, particularly but not exclusively in the state and old collective sectors. The third, which pervades both the preceding, is the realm of informal connections and connection networks which link together individuals in both state and business and blur the distinction between these two institutional sectors.37 If one takes this informal world into account, the formal realm of business associations provides a new context for personal networking, both among business people and between them and potentially helpful state officials. Unless one understands this interaction between formal and informal social relationships, one cannot understand the contemporary dynamics of state-business relations in China. Though it may take on distinctively Chinese characteristics, this interweaving of formal incorporative institutions on the one hand and informal clientelist interpersonal links’ on the other has its parallels in state-business relations elsewhere in Asia and in Latin America.38


(1) For detailed studies of these stages, see Chevrier, Sah (1990), and Bowles/White (1993: Ch. 6).

(2) For a discussion of this form of disguise, see Sabin (1994; 948–954).

(3) For these statistics, see SSB (1993: 367) and Beijing Review 20–26 June 1994, p. 18.

(4) Wenhuibao, Hong Kong, 13 July 1992, p. 5. This reference was supplied by David Goodman in a private communication.

(5) Zhongguo Tongxunshe (China Bulletin Agency), Hong Kong, 20 May 1993, in BBC, SWB: FE, 1695.

(6) China Daily, Beijing, 4 Nov. 1994.

(7) For a fascinating account of the new entrepreneurs and their impact on the urban social scene by an acute and experienced observer, see Schell (1994: 5).

(8) This point is made by Williams (1987) who cites the seminal article by Baumol (1968) on the role of entrepreneurship in economic theory. For a critical discussion of the ambiguous use of entrepreneurship in the various traditions of economic analysis, see Hodgson (1988), Williams (1987: 14–15) divides Chinese entrepreneurs into three groups: private owner-managers, managers in state-affiliated collective enterprises, and state employees who use state resources in an entreprenurial way.

(9) Interviewed in Shenyang on 29 Sept. 1992.

(10) Zhongguo Tongxunshe (China Bulletin Agency), Hong Kong, 28 July 1992, in BBC, SWB: FE, 1449.

(11) This statement was made during an inspection tour of Jiangsu, reported by New China News Agency on 25 Jan. 1990, trans, in BBC, SWB: FE, 0678.

(12) e.g. see Chong Hua, ‘Reform is beckoning the Taipingyang Insurance Cup Essay Contest…’. Jiefang Ribao ( Liberation Daily), Shanghai, 23 Nov. 1991, translated in FBIS 234.

(13) Jiefang Ribao, 14 Nov. 1994, in SWB: FE, 2171.

(14) Thus leased state enterprises are described as being ‘state-owned and people run’ (guoyou minying)\ independent collectives as ‘people-run collectives’ Ų jiti minying)\ and private enterprises as ‘private people-run’ ( siren minying ).

(15) For an example of a survey of managers on a major policy issue, the contract responsibility system, see Li Dongjing (1990). For the case of the enterprise law, see the article by Shen Feiyue in China Daily, Beijing, 18 Jan. 1988, pp. 1–2. During the political mobilization of early 1989, when entrepreneurs were singled out as a potential force for democratization, political reformers clearly saw the managers of large and medium state enterprises as a conservative force and looked for support among managers in other economic sectors and smaller enterprises (for an example, see an article on ‘encouraging democratic forces’ in China Youth News, reported by NCNA on 21 Jan. 1989).

(16) Liaoning provincial radio, Shenyang, ‘Quan Shuren talks with Liaoning entrepreneurs’, 24 Jan. 1990, in FBIS 022.

(17) ‘Li Peng and Zou Jiahua address enterprise managers’, NCNA (Chinese), 7 Jan. 1990, in SWB: FE, 0965.

(18) ‘NCP panel discussions turned into meeting for pouring out grievances’, Ming Bao, Hong Kong, 26 Mar. 1990, in SWB: FE, 0723.

(19) Interview with officials of CEMA in Beijing, 9 Sept. 1992.

(20) For detailed studies of the development of the private sector and the evolution of policies towards it during the reform era, see S. Young (1989) and (1992), Gold (1989) and (1990), Wang Zhonghui (1990), and Kraus (1991); for a wonderfully informative and insightful micro-study, see Bruun (1993). For a valuable Chinese study, see IPEIG (1990).

(21) Yin Xin, ‘Private sector plays vital role’, China Daily, Beijing, 9 Apr. 1993.

(22) NCNA (English), 27 Nov. 1992, in SWB: FE 1553.

(23) Over 10,000 Liaoning officials have cast down the gowns of public service’, Wenhuibao, Hong Kong, reported in Inside China Mainland, Mar. 1993, pp. 68–69.

(24) Ming Bao, Hong Kong, 4 Aug. 1992, p. 58, in SWB: FE, 1642; ‘A probe into the management of Party members who are private business operators from other localities’, People's Daily, 28 Feb. 1994, p. 5, in SWB: FE, 1955.

(25) Wenhuibao, Hong Kong, 1 Apr. 1994, in SWB: FE, 1963.

(26) ‘Private Enterprise Association formed in Shanghai’, Zhongguo Tongxun (China Bulletin), Hong Kong, 10 Jan. 1992, in FBIS 010. In the Chengdu district described by Bruun (1992: 11), local business people preferred to remain classified as ‘individual businesses’ and, at least until 1991, had managed to fend off pressures from higher levels of government to establish separate registration of private enterprises.

(27) Interview with the general manager of a private pharmaceuticals factory, Shenyang, 7 Sept. 1992.

(28) Interview with ACFIC officials in Beijing, 19 Sept. 1992.

(29) NCNA, Beijing, 24 Sept. 1994.

(30) China Daily, 31 Mar. 1993, p. 4.

(31) We interviewed officials of the National TVE Association in Beijing and the local associations in Shenyang and Nantong and a Peasant Entrepreneurs’ Friendly Society. With the exception of the latter, they were top-down, heavily official associations which reached only a small proportion of their potential constituency, mostly large and relatively famous enterprises and managers. The PEFS, by contrast, seemed to have been established with greater impetus from below, but suffered restrictions after the ‘rectification’ of social organizations in the late 1980s. As we saw in our study of associations in rapidly developing rural areas in chapter 7 , however, TVE entrepreneurs are an increasingly influential force in the countryside. For a quantitative sample survey of the managers of rural enterprises, see Wu (1994: 137–140).

(32) For a detailed analysis of associations in the foreign-invested sector, see Pearson (1994). Pearson concludes that ‘while the state is heavily involved in the Chinese Association of Enterprises with Foreign Investment, it does not completely dominate the association’ and ‘it is possible that CAEFI could evolve into an even stronger societal actor, eventually winning greater autonomy and influence’. We visited the national organization in Oct. 1993 and came to similar conclusions, though we suspect that the potential role of CAEFI is greater at local levels, particularly in the coastal provinces. For an analysis of the specific character of managers in the foreign-invested sector, see Pearson (1992).

(33) ‘Giving full confirmation to the role played by trade associations in a socialist market economic system’, Construction Materials Association Newsletter, 6, Beijing, 1993.

(34) ‘Wu Wenying talks about the General Textiles Association's approach to work and sectoral management’, Ibid. p. 24.

(35) One example we encountered was the Shenyang Entrepreneurs’ Association which had refused to follow the example of the national association and fuse with the local Enterprise Management Association. Moreover, SEA had joined with counterparts in twelve other large cities to establish a Thirteen Cities Entrepreneurs’ Friendly Society. As one official remarked, ‘whether we are allowed to register or not, we hold activities every year and play host in rotation’. Here is the case of a relatively ‘conservative’ association, in the sense that it represented interests threatened by the reforms, which is taking action to strengthen its constituency and wriggle free from state control.

(36) One example is that of the national and local branches of the People-Run Science and Technology Business People's Association (Minying Keji Shiyejia Xiehui), representatives of which we interviewed in Sept. 1993. This organization represented enterprises across the spectrum of formal ownership categories, which were united by the fact that, regardless of their formal ownership status, they were operating independently of the state. As one of its local officials remarked: ‘[Our members] demands and interests are different from the old state enterprises. They need an organization which is really their own to represent these demands and interests. That is why we organized such an association which is different from the Chinese Entrepreneurs’ Association. The CEA is funded by the state and their staff are employed by the state. We have no money from the state and no staff employed by the state. We are a non-government organization.’ Something similar could be said about the relationship between the Chinese TVE Association and the Chinese Peasant Entrepreneurs’ Friendly Society which we discussed in chapter 5 .

(37) For detailed analysis of these informal relations, see Bruun (1993) and Wank (1992; 1995).

(38) For analyses of Asian examples, see Milne (1983) and Maclntyre (1995); for Latin America, see Kaufman (1977).